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Record Number Of Americans Using Retirement Funds As Source Of Immediate Cash
If our readers have been wondering where, in addition to the decision to never make mortgage payments again, do Americans get the money to buy a 2nd iPad (for that real 3D-effect of iTunes porn), preorder the iPhone 12.499, and bid up Amazon stock at 999x P/E, here is your answer: according to a new study by Fidelity, a record number of workers tapped their retirement funds and made hardship withdrawals from their accounts in the second quarter. In other words, just like the country they live in, Americans no longer give a rat's ass about the retirement years in a narrow sense, and the future in a broader one, and since real unemployment is about 20%, wage deflation is everywhere, even as Solitaire time is down to 0 (except for SEC employees), and nobody has any money left, the only logical recourse is to borrow from the self-funded pension fund. According to the Fidelity study, "Among the 11 million workers whose 401(k) plans are run by
Fidelity, 11 percent took out a loan from their plan during the
12 months ended June 30, the company said, up from 9 percent at
the same point a year earlier. By the end of the second quarter, plan participants with
loans outstanding against their 401(k) accounts had reached 22
percent versus 20 percent a year earlier." And if anyone is so deluded to think that these not so gracious retirees have any intention of ever paying these "loans" back, we have some AJ-rated CMBS to sell you at par prime. Which also means that suddenly Fidelity may find itself with worthless liens instead of cash, and should the market plunge again and the fund giant find itself in a need to satisfy billions in collateral calls, it is game over. But why worry: after all, it is not like investors have been steadily pulling cash out of stocks over the past 15 weeks.
More from Reuters:
During the quarter, 2.2 pct of Fidelity's active 401(k) participants took a hardship withdrawal, up from 2 percent a year earlier, and another peak, Fidelity said.
Often those withdrawals were used to prevent foreclosure on a home or pay college tuition.
"People have been looking to their 401(k) plans as a source of relief to help them meet financial hardships," said Beth McHugh, a Fidelity vice president who oversees the area. "For many individuals that is their primary savings vehicle."
Loans and withdrawals were highest among workers between 35 to 55 years old, Fidelity found, peak earnings years.
Fidelity, the Boston mutual fund giant, is also the country's largest administrator of retirement savings plans like 401(k)s, making its quarterly survey a closely watched barometer of saver behavior.
As more companies end traditional "defined benefit" plans like pensions, workers are relying more on "defined contribution" plans like 401(k)s to carry them through retirement.
To encourage savings, tax codes and other rules discourage early withdrawals. Distributions from 401(k) plans are taxed as ordinary income, and withdrawals by individuals younger than aged 59 1/2 may be subject to an early withdrawal penalty.
Balances in 401(k) plans, which tend to be held in mutual funds dominated by U.S. equities, slipped in the second quarter as major stock indexes tumbled more than 10 percent.
The average 401(k) balance as of June 30 was $61,800, up 15 percent from a year ago but down 7.6 percent from $66,900 as of March 31.
Fidelity found signs of continued thrift in the workforce. The average percentage of salary saved in a 401(k) held steady at 8 percent, similar to the rate in the first quarter, while 32 percent saved 10 percent or more of their pay.
And since the administration will most certainly do the expected and react wrongly to this development once again, we expect to see even greater penalties to pension fund redemptions, which will do nothing to decelerate this troubling trend (and quite likely do the opposite), but merely take even more money out of circulation, as the government's bloated machine keeps ever more capital to fund such massively value added activities as the SEC daily porn surfing habits.
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I have to wonder how many of these people are taking funds to invest in gold/silver, frustrated at the limitaitons of the particular retirement accounts.
My estimate is 3 people
lol
on another note, I have a buddy that took out $10k loan a week or two ago to help cover his expenses like house payments/other bills.
Another acquaintance took out $10k, also, to help with bills. She isn't buying iPads or anything like that, but just trying to get by. I kind of feel for her...had a tough year or two, lately.
Right--what I see are people who are either stressed with a spouse out of work or who have a medical condition in the family. If you aren't lucky enough to work someplace with a good longterm disability plan, you are seriously fucked if your spouse lingers for 3 yrs with an illness.
i know someone that has to live with both. always being fired his jobs and major diabetes denial_er and this market is going to come back_er (that is a major illness you know). another shake my head at, seeing people with their dogs in wheel chair type devices. jeeze folks give it up. your going to have to go some time to. but shot me, if i ever do this to an animal.
Where did you go to primary school?
Clearly she didn't.
I junked you because I was able to read the post just fine. No need to be mean about short-hand type writing. It doesn't add any value to the discussion. Just move along.
Thank you for performing the roll of deciding what adds value on here.
that's 'role'.
"no need to be mean".
that's "mene"
Not necessarily.
Thanks for your input Joe. I think Kathy's post was texted from a handheld. I guess that's an ok excuse as long as you are not driving or operating large machinery.
There Was a good reason. I guess some folks can't think much beyond their own immediate sphere of influence and some are just crass.
Just crass I guess. By the way, I have a friend that was killed in a car accident recently where the at fault driver was found to have been texting at the time of the accident.
If you need an interpretation of that: I'm telling you to get fucked and mind your own fucking business you named-after-a fish asshole.
sweetness. If the retard_s friend has seriou_s diabetes and is in denial...mark that mf zero.
http://www.google.com/imgres?imgurl=http://latimesblogs.latimes.com/photos/uncategorized/2008/03/06/grunion_j0wxwvnc.jpg&imgrefurl=http://latimesblogs.latimes.com/lanow/2008/03/grunion-needs-a.html&h=325&w=500&sz=24&tbnid=7VPoLqt5dFHbVM:&tbnh=85&tbnw=130&prev=/images%3Fq%3Dgrunion&zoom=1&usg=__INv0vDU-ntVOZ32zRoEoSQyCPlo=&sa=X&ei=wvduTIndIoWBlAf7gvH0Dg&ved=0CC4Q9QEwBQ
Looks like you have some admirers in LA anyway.
Thanks to whoever junked me. I'm sure you text while you drive.
no chunk i don't text. i don't drive much either. let me tell you something about life around here. just walking, biking people come at me in their cars and i have to yell "I am right here you idiot don't run me over or look up your coming right for me or get the fuck out of my way stupid. i am not the nice girl i was 6 months ago and polite. these dumb assez need to be yelled at. i am dyslexic and attention disorder. thanks for all the replies boyz and girls you make me feel good about myself ;-)
hey kathy. I'm dyslexic and have ADD too. Just curious, do you ride your bike for transportation for exercise?
fuck you
Impressive words for a disabled person. Am I paying for your living? Fuck, did my tax dollars buy you that bike?
do U consider me disabled? we have to be careful insinuating these labels. cause i am currently in deposition row and this is their defense. cuckoo clock.
hey J O E
i just got a 1938 C A D E T the New Youth Portable typewriter.
you keyboarding men would love this one, even original sales slip and manual
HOW TO L E A R N TYPING. it is perfect for me. now all i need is some new ribbon. it doesn't have a #1 key cause you use the IIIIIIIIIIIIIiiiiiiiiiiiiiiiiiii key. cost $14.59. my strategy when obe one doo doo turd takes the internet down i can learn how to type better and send zerohedge love letters. im boy crazy, in case you didn't notice. i am going to get liquor_er up now, with my purchase of santa margarita pinot grig, honor after the ship with this name that had all the gold silver pearls diamonds precious metals drown in 1600's sounded fun and italy to dream.
hey yo pinnochi_ho let me kno_w if you run for office so i can vote 4_u.
your a big vot_er i see.
.
Hell they charge 3k to set a bone. If you need more than 15 minutes of medical attention you're screwed.
that's subliminal, hep, hate that word.
Have a friend who was already stretched thin. Then the car went belly up. Then the AC broke. 401k going to get tapped any moment now to get by.
It all about cash flow now folks. At the individual and corporate level (edit: and govt too). And anyone who has been in such a position knows that when cash flow meets a bump in the road, the wheels can come off in an instant.
The first in my example was getting stretched thin...we are in commercial truck sales and I'm sure you can figure out how that is going lately.
He does spend a good amount of money on eating out and things like that, but he isn't that crazy about things. Son is in college, daughter is 15ish...and his girlfriend (who loves spending the money) just flooded their house by sticking clothing in the sink to wash and forgetting she left it on. I think he said this was the 2nd time in a short period....upper floor floods and drains through the floor/first floor ceiling. He was a bout ready to kill her!
He was stretched thin before all of this and then this happens. When it rains, it pours, I guess.
She's flooded the house twice, loves spending money and she's still around? She must be doing something right.
Nobody does it that well.
I think they are using Insurance claims to live on. To much of a coincience. That is why Insurance Company like to check peoples credit history. To many in trouble use their insurance for income.
Right. It has nothing to do with the insurance industry feeding guaranteed business to the credit reporting industry, then passing it back to the consumer in the form of higher premiums.
Oh no. Can't be.
Not to worry. Get used to it.
There's no A/C in the FEMA Camps and's only a short stroll from your bunk to the mess or gas chamber.
+ !!!!
I can only think of - maybe - 2 friends my age (under 30) who have money in any sort of 401(k)/retirement account. The extra money just isn't there after expenses, assuming we even have a job in the first place, and when we do have work we're busy preparing for the next period of unemployment and/or unforseen government shakedown.
Generally speaking, in the last 10 years or so most of our nominal incomes have quadrupled, but we're poorer now than ever.
Minus,
You hit it on the head. Young people don't have any savings because they never had jobs that paid enough to save. All you baby boomers think you are going to retire? Who is going to support your retirement when all of the good jobs are in Asia? No one. We all know how this story ends.
Good point CenterLine and with yields soo low passive/investment income is getting riskier the more yield you chase/need... and then drum roll, please - the gov't increases taxes on divvys!
Slow day it seems...one more for this friday...this is a solid one, i promise :)
one good turn (a playlist): http://www.youtube.com/view_play_list?p=DBB6891B8CA31A85
one to add...
Heaven is a Half-Pipe
http://www.youtube.com/watch?v=iTYafNtr2v8
baller dude, thanks...y'know i hit the halfpipe as often as i can (tho i fruitboot, shhh)
ouch! concrete. my daughter skate boards, broke her arm though. wood pipes i would do.
I have a wood pipe but it's for Rapunzel.
wood pipe for rapunzel, i will use a long board, promise.
your always solid, my man. even impressed my child with your
S O L I D friday the 13th D I E list and play.
infinite thanks d(-_-)b
a couple years ago when my little brother was a baby, i would put him in front of a screensaver and bump some techno. you've never seen a happier baby :)
My kinda hella phat baby
I just hate the fact I can't rock out at work...and by the time I get home, I'm either half-drunk and not thinking about it or too tired to fire up ZH and hunt down your list.
One of these days, though. If you like some of the stuff I've posted, I'm sure I will love your stuff.
Junked?
I should say I hate the fact I can't do youtube at work...I can rock out whenever...I'm in sales.
I've noticed that some boards/discussions just get drive by junked one after another.
I hear banjos. Paddle faster Joe.
hey J O E
get drive by junked
copyright it or ZH t-shirt.
3 IS a lucky number and it has religious implications too
Verily. According to the Book of Armaments, thou shalt count to three, no more, no less. Three shall be the number thou shalt count, and the number of the counting shall be three. Four shalt thou not count, neither count thou two, excepting that thou then proceed to three. Five is right out. Once the number three, being the third number, be reached, then lobbest thou thy Holy Hand Grenade of Antioch towards thy foe, who, being naughty in my sight, shall snuff it.
verily verily that was some funny shit. Yer gonna burn brother but you wont be alone.
umm...make it 4
2 1/2
I've been doing it for 6 years, paying myself 1 pt. above prime to do so.
As soon as my cash balance gets far enough ahead of my loan balance (only allowed to borrow up to 50%), I'll pay off the current loan and take out another.
I think your estimate is generous
How can this guy have 2 junks? He's right. If more than 3% of the American populace has cashed out IRAs and 401-Ks to buy PMs, I will give Pee Wee Herman a "Bernake".
ME! Dumped out of my 5 year average -5% return funds bought gold and silver and am up 33% on my silver, holding steady on my gold. I think my equivalent fidelity fund would probably have lost me around 15% by now this year.
You are right on LoneStar... though I would suspect I am in the minority, and in general the conclusions of the article are correct.. I pulled a max loan out of my Fidelity-run 401K last year for that very purpose....buying my first slug of Gold at 1070.
I hope this is better than the last batch of shit you gave me. Produced more wood than Ron Jeremy. I don't want you to yell, "Reco!" anymore. Know what you should yell? "Timber!" Yeah, Mr. Fuckin' wood. I hear you fuckin' makin' your calls. It's bullshit, all right?
--dbl post
Ya that's what their doing.
<Sarcasm Off>
wow...if timmy is planning on stealing this cash from people, he better move fast. another six months there will be nothing left there to force into the treasury market.
I have a fidelity 401k at work and that's exactly what I did last summer. Took out a loan to buy gold coins and juniors. Glad I did.
I did exactly that.
LSH,
The one's taking out loans, NO.
Paying interest on your own money, is insane,unless it's coming BACK into your account.
The one's emptying their accounts, are likely doing so, to a degree......(If their smart).
My bet is not near enough are.
Here's one. The way I see it is you can pay yourself the loan "interest" (that's how my plan works, not sure if all do), and lock in a return on the amount withdrawn. Or, to avoid the risk of a >50% drop like in 2008-early 2009 you could 1) earn nothing on the only safe mm option or bond funds and get hammered by inflation, 2) keep it in equity funds that could get hammered by deflation, 3) get sucked into the con that this is a long term investment and stay in stock funds and believe subsequent deferrals are lowering your cost basis, or 4) hope to change your weights based on the prevailing/perceived market conditions. Most I speak with have kept allocations the same as pre-2008 meltdown, having made a good chunk of their losses back through the present.
I also took out a loan in summer 2007 to fund a down payment on my first home, and locked in a nice high interest rate on the loan. Didn't work out so well on the home side, but my 2 401k loans helped me return >8% since 8/08. It's only a small comfort considering the gloom and doom I serve to myself up in my daily ZH visits.
Nevertheless, I have to say ZH is required reading if you have already taken the proverbial red pill (ZH was my red pill). I sometimes want to scream "wake the F!_!(!< up!" to my coworkers, but when I talk to them about the economy and our financial system (work for a bd/ia), they gloss over and don't want to think the good days of merely worrying about how to pay for their retirement and their kid's college may indeed be over, at least in the traditional sense that their kid's lives will certainly be better than theirs. I've since stopped talking about it, lest they start seeing me as Mel G in ConsTheory.
DC killed the golden goose, knows it, and now is fighting over how best to cook it up and who gets the white and dark meat.
Let's get real. These people aren't buying iPads with the money. They are long-term unemployed who are cashing in their retirement investments to stay afloat for a little longer.
Tyler, you do a real good job of pointing out the outflows from the domestic mutual funds. You acknowledge the unemployment problem. Now you point out the people cashing in their 401k's. How come you can't put two and two together?
It's pretty obvious.
Sheesh! Look up the word SARCASM !
Yup used it correctly. Thanks
Actually the bigger point of the post is that mutual funds are now net undercapitalized, as according to the report, a bulk of Fidelity's (and likely every other mutual fund) "assets" are encumbered with liens to clients. I would bet that with gross cash already at record lows, cash net of liens is negative. Explains why stocks must. go. up. no matter what or else the Fidelity's will soon be seen swimming naked.
Thank you for this clarification TD... I had not connected the dots that way.
+1, along with broke pension funds.
So although the news seems bad for the markets, TD is actually arguing that it means buy buy buy because the government(?) must make stocks go up "no matter what."
Not yet. The hyperinflation warp-drive (err, singularity bomb) is not entirely fueled yet. Te crappy part is that if we actually catch that wave, it would probably wind up like the end of Point Break. At least we get to die like men though.
ML,
Yep, just like Banks....................you put in ONE, they loan out NINE.
Think these goofy assed Pension Funds are not using OUR 401k funds?.
TD, I never thought about this. Do you (or anyone else) know what percentage of your 401k that you can borrow? Do they have margin calls? Are these Fidelity's liabilities? Can Fidelity forcibly sell out 401k funds and pay off the loan like marge? If so, that sure will be adding some petrol to the fire when the next big downleg hits.
I don't know how universal the rules are... in my case, I can borrow up to 50% of assets, not to exceed $50K.
ML,
Depends on how long you have been in the fund,and an employee.
Fully vested...........
The IRS as regs as to what the plan document will allow for loans. Usually 50% but the max can be set a less or with exception, you can access more than 50%. (Like all things IRS, get with your tax pro way before you actually do anything ... and don't rely on Turbo Tax to walk you through!)
There are also rules on repayment of the loan, both in duration of the loan, rate and schedule.
Screw that up and you end up showing the loan as income (with the penalty and with govt interest).
Personally, I'd rather go ahead and sink beneath the waves (because the creditors, with only a few extreme exceptions cannot take your retirement money).
Also, little published change in effect now ... if you leave employment and cash out your retirement (ie don't rollover) there is no penalty tacked on. ,<sarc on> (a little woo-hoo, anyone?) <sarc off>
old,
Unless your 59.5, you will get hit w/ a 10% shot, and you will pay income taxes at your current rate of the full amt at tax time.
Unless I am seriously mistaken, when did the 10% penalty get dropped?.......
Dos, thanks for the question, forced me to go through Pub 590 again (first time in a couple years).
http://www.irs.gov/pub/irs-pdf/p590.pdf
When Can You Withdraw or Use Assets? p. 31
Tax-Free Withdrawals of Economic Stimulus Payments p.33
Didn't find the indicated exception, didn't try too hard, though.
- Ned
OT: I'm sticking with Hezb'Allah (Party of God) because people don't get the connection to the "religion of peace." To be clear, this is a pointed stick into the eye of every member of Hezb'Allah. ONLY.
Most rules are governed by IRS tax law, coupled with company 401k/403b rules. Most have limits consisting of , hardship (mortgage default (with proof) medical again with proof), purchase of primary residence. Some have limited cash withdrawal against ready convertible funds (stocks,money market) with a limited term usually 5 yrs. linked to Moody's commercial bond rate.
Tyler, 401k loans don't work that way. When the account holder takes out a loan, the contents of the account are liquidated as necessary to provide the funds. There are no encumbered assets because there really wasn't a loan from Fidelity to the account holder. Instead it was simply a matter of the account holder selling assets and taking cash.
It is only a loan in the sense that the government considers that cash to be borrowed from the 401k account. If the account holder keeps it instead of putting it back into the account, then the loan becomes a distribution with tax penalties.
+1
True but (and I may be misinterperting TD, here), the point here is that there is an asset setting in a retail account that could (conceptually) be used by the broker without explicit permission and could in fact be worthless.
If so, the net effect would be a reduction in critical leverage. Without unwinding the other side of the equation on the broker side, there be nakedness going on.
and why could shares held by the mutual funds not be made available to other funds/individuals as legit shares to short? Ned and Abbie not leaving many nickels on the table.
- Ned (but not that Ned)
yes the b i g g e r point is the most important. people would not see or understand that automatically. cause and affect, yin yang, murphys law. go on on on on.
Neither Fidelity or its funds have credit exposure on these hardship loans. The loan amount is withdrawn from the employee's account and the employee (or former employee) must pay it back to his own account with interest. If he fails to pay it back, then the unpaid balance is deducted from his account. Thus, the hardship loan becomes an asset of the employee's account, or a liability of the employee, not of Fidelity.
The reason employees take hardship loans is to avoid income tax and the 10% early withdrawl tax on the amount they withdraw from their account. Plus, hope springs eternal that their prospects will improve and they will be able to repay it with interest. If the employee defaults, then he is taxed on the loan amount and the 10% penalty if under retirement age.
Difference between 401(k) and Public Defined Benefit Borrowings
401(k)
Ta-Dah! That's the way it works!
Mr. Joe Billy Bob has borrowed from his own equity position in his own IRA/401(k) account, wherein assets inside of the account have been liquidated to raise the cash to make the "loan."
Public Defined Benefit Plans
Now, if you want to talk about some Public Plan Loans And Pensions, CalPers for example, allows retirees to purchase additional years service for calculation of annual benefits. And guess what?
What, Mr. Knukles?
CalPers will actually let you retire having purchaesd additional years service and Loan You The Money to Make the Payment for the Additional Years Service Purchased, to be repaid over Future Years.
So, Mr Knulkes, lemme get this straight. You mean that CalPers will pay me more than my contributions should have been calced out at and even loan me money from the underfunded fund to do so? If the return assumptions thereon are too high and benefits purchase at overstated levels due to unrealistically high discount rates, you mean that the borrower is getting an unrealistically achievable deal (math) from an underfunded plan?
Yes! That's the general gist of the arrangement! You get an IOU with a gold pastie star!
And the taxpayer gets to make up the difference, doesn't he Mr. Knukles?
Yes, Mr. Taxpayer makes up not only the pension shortfall, but also the participant's purchase of additional shortfalls for the fund! That's right, Billy Joe Bob!
The taxpayer's fucked again.
Happy Now?
Thank you for connecting the dots. I had not realized that.
Look! It's the humps of some sort of sea monster! Nah, it's just Fidelity's buns :D
Most if not all are swimming naked. It's the new normal. No shame.
I think it's because Tyler understands that correlation does not prove causation. But you are probably correct in this case.
You may be correct or you may not be. Lets not forget, theses are the same people who sucked every penny of equity out of their homes to buy a bunch of shit they didn't need. Same people who racked up maxed out every credit card they could get there hands on over the last 30 years to more shit they didn't need. So stay afloat- maybe, but the more likely scenario is they again bought even more shit they didn't need. With iFrauds and iMaxipads flying off shelves with 20% unemplyment whos to say the sheep are cashing out 401K's to buy more Apple crap?
The accuracy of your statement varies wildly by age group. I know a lot of people who emptied out retirement accounts entirely, and none of them so much as owned a house, let alone filled it with shit they didn't need.
Putting money away for retirement was one of those things we assumed were a given, along with getting a degree(s). Both turned out to be really shitty ideas.
From the older to the younger - "You fucked up! You trusted us!"
On behalf of Gen Y, NO - we did not fuck up because we did not trust you! Loads of credit cards with 10K limits, no fees, and little interest were a way for many of take the opportunity to say fuck it and just live for the moment. So yeah, I have a few kick ass imacs' ipods, plasmas, all kinds of UNSECURED DEBT.
Now I don't plan to pay any of it back because I never should have been given the money in the first place. Yeah I take a hit to my credit but something tells me that in 5 years, credit won't mean shit!
Amazingly, my credit score is still pretty good and I haven't made a credit card payment in almost a year.=) Looks like you fucked up, we knew it and decided to go out with a bang as well!
You got that right...
And this is totally inaccurate...
Which also means that suddenly Fidelity may find itself with worthless liens instead of cash,
I have a couple of friends in the marketing business who have had their unemployment benefits run out and who have had to tap their 401(k)'s for the funds just to live on and pay rent. While your characterization of Americans using their 401(k)'s to buy iPads may be correct on a broad brush basis, it is unfair (just as the characterization of unemployment benefit recipients being too lazy to find a job) to real professionals who cannot find a job no matter how hard they try. You cannot post that the economy lost 8 million jobs since the start of this depression on the one hand and on the other hand condemn everyone who is out of work as being shallow and venal.
+1
thanks for the reality-based comment
Had I seen your comment before, I would have just "+1'ed" yours. Thanks.
True. True. +1
professionals...marketing...???
Every "marketing" professional I've ever known just orders T-shirts.
lold
Avg retiree has a whoppin $9,000 in the bank, sidelined trillions was the biggest lie ever, and USA is in the depths of the worst depression ever.
As an RIA, I work with retail investors. In my practice, people call every week to make withdrawals from their accounts. First, it was non-qualified accounts. Second, as those accounts run low, they have started to tap into their qualified accounts. I always ask why they need the money. Most need it to pay their living expenses or those of their children. I have not heard of anyone who is using it to buy consumer goods. The other big expense is to pay off their credit cards or help their kids pay off their "I'm almost in bankruptcy" bills. This is deflationary, and not good for Ben's "the economy is getting better" fantasy.
I second the observation. I specialize in qualified money and my clients are taking out money like there's no tomorrow, which it appears to many of them there won't be. Of course, because they're using the money for "normal" expenses, most won't qualify for the special exemptions to the 10% penalty for outright withdrawals before 59 and 1/2. And of course they will owe income taxes on the distribution.
Worse, and I do mean worse, I always try to convince my clients to let me withhold some money to cover (some of) the tax bill they will see next year. I try to do this because if they're hurting for money now, they'll probably be hurting come tax time and they won't be able to pay uncle Sam. This is becoming nearly impossible for me to get them to do. They want what they want and they don't want taxes paid.
I smell a small scale tax revolt unfolding or unmitigated panic. Or a mixture of both.
So far, I've been able to get them to withhold generously (fingers crossed there will be refunds next year.) With your scenario, there's going to be serious problems for the clients come April. As a suggestion going forward, make sure you have the clients sign something (maybe even a couple of forms), documenting that you begged them to withhold something. I would probably do two things. First, on my B/D withdrawal form, I would print something like 'CLIENT DOES NOT WANT ANY TAX WITHHOLDING, EVEN THOUGH BROKER RECOMMENDED IT." Second, I would probably make up a Letter of Instructions to me from the client, instructing me not to withhold any taxes. i would fax that letter to my compliance office for a date/time stamp as evidence.
Agreed. I'm pretty anal when it comes to getting my clients to sign off when they don't take my advice.
Yep, I do that with my clients (non-financial, as all must know).
At least we often have a chance to "re-visit" an issue and turn things around. Net a business-generator, often with a different individual on the other end.
- Ned
CD--What's your estimate of when it'll be too late to cash out an IRA or 401-K before Uncle Sam seizes it and gives the previous owner (me) "Social Security credits" in return?
I prefer to keep the tax break and hold PHYS and various mining companies, but before I get robbed I'd like to cash out and store PMs in the floor safe--will I hear footsteps from Uncle Sam before he robs my IRA?
Excuse my cop out but there's just no way of knowing when or how this unraveling will accelerate and take so very many down with it.
I will say this with absolute certainty. WHEN (not if) they pass the legislation that confiscates your IRA/401(k)/pension (though they will use nice words such as "guarantee" you receive retirement payments for your entire life, but in order to do that it must be invested in [......fill in the blank] so hand it over to the government) the law will be made retroactive by (X) number of months /years to ensure that those who saw it coming are also grabbed along with the trusting souls who said it would never happen.
Just my two cynical and realistic cents based upon the axiom that desperate men will absolutely positively do desperate things that ensnare the greatest number of fools.
Yup - in Weimar they retroactively set speculative loans (inflation borrowing) back to the original Goldmark value. This little bit of history says don't assume that you can get free money in an environment where retroactive change is commonplace. (Hint: you're living in one)
You spend a lot of time on the hedge for someone with so many 'clients'. Do you teach them ZH philosophy?
ZH philosophy
do or D I E
"With your scenario, there's going to be serious problems for the clients come April."
That would be if people are still inclined to pay taxes come next April. When things collapse, it happens very quickly. When people finally have had enough and say "fuck it", major change will happen or else.
Had to cash out my 401K as a last resort for living expenses after my wife and I both lost jobs. Been scraping by on part time 1099 gigs that put us over the limit for food stamps and other assistance. My attitude towards witholding the taxes was fuck them. We rented our housing, had no credit card debt prior to losing our jobs and chose not to participate in the "anyone can have a mortgage" program. Now the government is helping these people, while we played by the rules and got fucked. They can go to hell while we try to rebuild.
I feel for you, dude.
I worked 1099 gigs for 4 years... 3 months on, 6 months off, etc. It's no kind of fun and it's a very tough cycle to get out of. What's worse is that contractors (1099s) do NOT qualify for unemployment insurance, even though they must pay into the system. This on top of the fact that contractors don't recieve any health or retirement benefits... you have to forego or pay/save for that stuff yourself, which is nearly impossible given the costs.
But there is light at the end of the tunnel. After using my all-too-frequent downtime to accomplish some personal objectives (like alternative energy production and building a root cellar and large garden) I finally received a full-time offer from a local healthcare provider. Alot less money than I used to make, but it's full-time + health benefits. And it's local, which is a change for me - a lifelong road warrior.
Three bits of advice for you...
1) use your downtime well. build. learn. downsize.
2) focus on the industries/employers who actually have budgets to spend: mega-IT, healthcare, certain government sectors, agriculture, energy.
3) get the hell out of California... you are riding on the Titanic. Fuck the weather - that state is an unmitigated disaster.
They can't send everyone to jail. They can't garnish nonexistent wages. At some point, people may welcome free rent on a 4x6, three squares, and cable TV.
speaking of, I work in criminal law and I am now seeing parents tap these funds to pay for some of the kids criminal defense bills. Never saw that before.
Don't get us started on the criminal justice "industry".
What did these kids do to need criminal defense? Alcohol? Drugs? Vandalism? Petty Theft? Lets charge them with felonies so they are fucked for life don't Ya think!!!?????
No let's make grand larceny 400 bucks and then inflate so fucking fast grand larceny becomes a huge crime for nothing within 5 years.
Don't forget the sweat lodges!
http://www.thesmokinggun.com/buster/department-justice/department-justice-no-longer-looking-hire-medicine-man
Well I certainly have the drug usage background to qualify as medicine man. In fact, when I was young and .........er..........never mind.
I think that one doesn't have a statue of limitations.:>)
if only time were the only limitations to our statutes
One of my other limitations is obviously spelling. :>)
I don't know my statues from my statutes. What was great was you didn't say a word. Sometimes the hardest thing to say is to say nothing. Thanks.
edit: But my friend below did. Some day I gotta go see that statute. :p)
Statue of Limitations...that's the one out in the harbor visible from New York City, right?
See above. And just for that, I want that money face back. :>)
lol...I just thought 'statue of limitations' was clever. They should call it that.
If that's a money face it must be Bernanke's!
i had JOSEPH do a sweat lodge on my property, back in the day with all the blonds pony tail girls. but it was cool/hot. have to collect lava rock off the mountain. build it. Joseph was U T E indian, wrote a book. in fact he was called upon in regards to the SOB murdering those people in sedona. they should be small intimate, lead by a healer not a murder_er. i love to sweat.
"At some point, people may welcome free rent on a 4x6, three squares, and cable TV."
a.k.a. Prison. Which is what much of the country is building for itself. An invisible debtor's prison.
give me liberty or give me jail! the food isn't as bad as it use to be. no mortgage. no bills. priceless! just relax. you have rights as a prisoner and the health care is great.
If your clients go on payment plans with the IRS for that tax bill the interest rate is ridiculously low. Far lower than they would pay to a credit card company if they could even get the money that way. Just pay your $50 agreed upon monthly payment and they leave you alone. I know cheap money got us all into this but if you can still get it you might as well use it to buy real assets that might hold their value and aren't easy to find by the government.
Payment plans are granted on a case by case basis. You can not assume you will be granted a payment plan by The Service. If not, count on penalties and interest piling up.
I've never seen one denied, and the rates are still ridiculously low, but I get what you are saying. I was just saying for those that feel that things are about to pop in a really big way it might be the lesser of all evils.
How many have you seen?
I would bet on unmitigated panic. With the increasing number of 99'ers out there, and even people who still have jobs are working fewer hours, the double-dip (which is probably already here) is going to make for a crisis.
The Republicans may regret winning in November.
not as much as we regret either party winning...
If they were wise they would run for the hills in fear of the lynch mobs.
So like I said, I will be buying long, long lengths of heavy rope this weekend.............
Thin stainless wire and a little bit of electrical tape, hickory dowel.
Up close and personal.
- Ned
You assume that people who run for public office actually want to FIX things. That ain't necessarily the fact. One has to be a special kind of narcissist to want to hold "public office".
I have been an energy trader for more than ten years.
In the USA since the subprime collapse,
truck traffic (distillate fuel use) has declined by about 10%.
Airline traffic (jet fuel use) has declined by about 15%.
Automobile use (gasoline) has declined by 1%.
That means to me that about 10 million formerly employed americans are driving around in their cars (or SUV's) all day.
Want to try to explain to me that that is necessary?
You still see hardly anyone walking or riding bicycles,
and our county is cutting back bus service because of lack of use.
People seem to have some pretty funny ideas about what they "need"....